Home » **VOLUME COST PROFIT ANALYSIS**

Cash Break-Even Point
The VCP relationship can also be used to show the liquidity position of the firm. This is done through the computation of cash break even-point or cash break-even sales revenue (CBEP/CBESR). Algebraically:
Graphically, the CBEP is determined at the point of intersection of total cash cost line and total sales line. The area to the left of the curve signifies cash losses and the area on

Application of the P/V Ratio
1. Determination of BEP = FC + P/V ratio
2. Determination of profile at given/budgeted sales volume = (Actual sales – BE sales) x P/V ratio.
3. Determination of sales volume to earn budgeted profit = (FC + DP) + P/V ratio.
4. Determination of change in sales volume to maintain the current level of profile if there is (a) a change in sales price, (b) change in variable cost

Important Points Regarding
In Figure, there are two cost lines to show, which is designed to reveal the change due to the selling price has only one sales line (45°). The impact of change in the sales price is reflected indirectly in the variable cost which is line and is represented by the cost line. Thus, due to the fact that an essential input for drawing the chart gets selling price is changed. In other

TABLE
VCP Applications
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VCP Applications
Volume Cost Profit Graph Same Scale
Volume Cost Profit Graph Cost Wise
to similar other questions are available in the VCP graph. The VCP graph can be modified to show the changes in the profitability factors of Example such as,
1. Change in fixed costs (Rs 10,000 both ways)
2. Change in variable costs (20 per cent both ways)
3. Change in selling price (25 per cent both ways)
Table provides a s

Assumptions Regarding the VCP Graph Are
1. Costs can be bifurcated into variable and fixed components.
2. Fixed costs will remain constant during the relevant volume range of graph.
3. Variable cost per unit will remain constant during the relevant volume range of graph.
4. Selling price per unit will remain constant irrespective of the quantity sold within the relevant range of the graph.
5. In the case of mult

Break-Even Chart/Volume Cost Profit (VCP) Graph
The break even chart is a graphic relationship between volume, costs and profits. It shows not only the BEP but also the effects of cost and revenue at varying levels of sales. The break-even chart can, therefore, be more appropriately called the volume cost profit graph (VCP graph).
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Graphic Presentation
Under the algebraic technique of break-even analysis, separate computations were needed to arrive at the above set of figures. The utility of the graphical technique is that such a set of figures can be determined without involving any separate calculations.
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Break-even Point
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Break-even Point
Increasing the mix of high P/V products ( Y from 30 to 40 per cent, Z from 20 to 30 per cent) and decreasing the mix of a low P/V product (X from 50 to 30 per cent), the company can increase its overall profitability. In fact, it can further augment its total profits, if it can make and the market can absorb more quantities of Y and Z, say Rs 1 lakh each.
Break-even Poi

Multi-product Firms (Sales-mix)
So far, we have confined our discussion to a one-product company. However, many manufacturers make more than one type of product. The relative proportion of each product sold in the aggregate sales is known as the sales-mix. A changes in the mix of products sold usually affects the weighted average P/V ratio and hence, the BEP. Thus, when the products have different P, V rat